The Conceptual Framework refers to ‘accrual accounting’, also known as ‘the accruals concept’ or simply as ‘accruals.’ĭefinition: ‘ Accrual accounting depicts the effects of transactions and other events and circumstances on a reporting entity’s economic resources and claims in the periods in which those effects occur, even if the resulting cash receipts and payments occur in a different period.’Įssentially, what accrual accounting means is that the date on which cash is paid or received is often not necessarily the same as the date that the actual transaction takes place, but this should not delay the transaction being recorded. While an awareness of what is meant by ‘a different basis’ might be expected (for example, break up basis), candidates would not be expected to apply that basis to calculate values in the FA2 exam. who decides whether the going concern assumption should apply.what different basis could be used and.circumstances in which the going concern assumption might not apply. This is an advanced issue that will be considered in later exams. For FA2, candidates do not need to consider the time period that might be regarded as the ‘foreseeable future’. The basic point about the going concern principle is that it is assumed that the entity will continue to operate for the foreseeable future. If so, the financial statements describe the basis used. If such an intention or need exists, the financial statements may have to be prepared on a different basis. Hence, it is assumed that the entity has neither the intention nor the need to enter liquidation or to cease trading. Going concernĭefinition: ‘ Financial statements are normally prepared on the assumption that the reporting entity is a going concern and will continue in operation for the foreseeable future. Where a formal definition is provided by the Conceptual Framework for Financial Reporting (the Conceptual Framework), that definition is given, followed by an elaboration of the key points of that definition that candidates need to understand. What candidates need to know about each of these is:Įach of these principles and concepts are considered below. Principles and concepts of accountingįor the purposes of the FA2 exam, there is a list of principles and concepts of accounting which you need to be familiar with and which can be found in learning outcome A1(a) in the study guide: There is a complimentary FA2 article titled ‘Qualitative accounting characteristics’ (see 'Related links') which provides more detail on the qualitative accounting characteristics. The focus for this article is the principles and concepts of accounting. It is important to note that the principles and concepts of accounting are distinct from the ‘qualitative accounting characteristics’ and this differentiation is clearly set out in the Detailed Study Guide (‘the study guide’). These difficulties may arise because the learning outcome is more theoretical than other parts of the syllabus and tends to be examined in narrative style questions, which some candidates may find more difficult than calculation-based questions. This learning outcome causes difficulties for some candidates. Learning outcome A1 from the FA2 syllabus is related to ‘The key principles, concepts and characteristics of accounting’. An introduction to professional insights.Virtual classroom support for learning partners.Becoming an ACCA Approved Learning Partner.
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